Italy is considering emergency financing for Alitalia as the carrier risks running out of cash in a few weeks because investors and creditors are reluctant to fund a new rescue plan without a labor agreement on job cuts, according to people familiar with the matter.

The Finance Ministry is pressing state-owned lender Cassa Depositi e Prestiti to provide 200 million euros ($216 million) of financing backed by a state guarantee as part of 400 million euros of so-called contingency equity, said the people, who asked not to be identified because the discussions are private.

Etihad Airways, which owns 49 percent of Alitalia, is ready to invest the remaining 200 million euros, the people said. The money would be used to keep the airline afloat if the five-year restructuring plan announced March 15 fails to get backing from remaining investors or the company fails to reach its financial targets.

Finance Minister Pier Carlo Padoan, in an effort to meet European Union rules on state aid, may use a 2003 Italian law that allows state guarantees to be used for Cassa Depositi financing, the people said. The Italian government and CDP are still evaluating the mechanism and no final decision has been taken, they said.

Time is running short for the Rome-based company, which went bankrupt in 2008 after rescue attempts involving the state and private investors failed. Etihad bought its stake in 2014, but its turnaround strategy so far hasn’t generated earnings. Liquidity may only last until mid-April without emergency funding, la Repubblica reported Feb. 26. The government-backed financing would be a last-resort cash buffer, the people said.

Alitalia, which has lost over 600 million euros in the last two years, was notified in December by investors and creditors including UniCredit SpA and Intesa Sanpaolo SpA that it had 60 days to come up with a viable cost-cutting proposal. Alitalia’s board then approved a new business plan on March 15 that calls for the carrier to reduce costs by 1 billion euros by 2019, when it expects to be profitable. As many as 2,000 full-time and temporary employees would lose their jobs in that scenario.

Those proposed job reductions immediately prompted protests by Alitalia’s unions, who have scheduled strikes in coming weeks. “We are convinced that this is not a turnaround plan,” said Claudio Tarlazzi, head of the Uiltrasporti union. “I don’t see any reason to cut labor costs.”

Alitalia Chief Executive Officer Cramer Ball argues that reducing the carrier’s workforce is essential for its survival. “Headcount reductions are a painful but necessary action that, alongside other cost reductions, will stabilize our financial situation and create long-term sustainability,” he said March 17 in a statement. The action is “essential if we are to compete effectively in the extremely tough European aviation market.”

Alitalia’s latest business plan includes equity and credit lines totaling 2 billion euros, of which 900 million euros would be provided by Etihad, Economic Development Minister Carlo Calenda told lawmakers March 22. The airline “must remain a private company and the impact on state accounts has to be kept to the bare minimum,” he said.

Representatives for the Italian Finance and Economic Development ministries, Alitalia, UniCredit, Intesa Sanpaolo and Cassa Depositi declined to comment. An external spokesman for Etihad didn’t have an immediate comment.

To contact the reporters on this story: Tommaso Ebhardt in Milan at [email protected], Chiara Vasarri in Rome at [email protected], Chiara Albanese in Rome at [email protected]

To contact the editors responsible for this story: Vidya Root at [email protected], Dan Liefgreen, Jerrold Colten

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Photo Credit: This Alitalia passenger may not be smiling so much after meal service is discontinued on many flights due to proposed budget cuts. Alitalia